Oil prices fall after Libya signals output to resume

Oil prices dipped on Monday on demand concerns due to rise in the number of coronavirus cases across the globe. AFP

Oil prices edged lower on Friday after Libyan commander Khalifa Haftar said a blockade on Libyan oil exports, which has been in place since January, would be lifted.

Erasing gains made in earlier Asian and European trading hours, Brent, the international benchmark, was down 20 cents at $43.10 a barrel while the US oil futures fell 20 cents to $40.77.

The benchmarks were still set for weekly gains after Hurricane Sally cut US production, Saudi Arabia pressed allies to stick to production quotas and banks including Goldman Sachs predicted a supply deficit.

Mr Haftar's comments came after Libya's National Oil Corporation said overnight it would not lift force majeure on exports until oil facilities were demilitarised.

Libya was producing around 1.2 million barrels per day. It is unclear, however, how quickly Libya could reach that level again.

Earlier, Goldman Sachs predicted a market deficit of 3 million bpd by the fourth quarter and reiterated its target for Brent to reach $49 by the end of the year and $65 by the third quarter of 2021.

Swiss bank UBS also pointed to the possibility of under-supply, forecasting Brent would rise to $45 a barrel in the fourth quarter and to $55 by mid-2021.

Opec+ are cutting output by 7.7 million bpd and stressed at a meeting on Thursday that it would take action against members not complying with the deal.

"We think [Opec+] will put on hold plans to taper the cut down to 5.8 million bpd ... when the entire group convenes again in December," RBC analysts said.

Saudi Arabia said an earlier meeting was possible if oil prices fell alongside demand because of a second wave of coronavirus cases.

"Yesterday’s enthusiasm was not a one-off event. The market now feels the ground more stable to maintain $40+ price levels," said Rystad's head of oil markets Bjornar Tonhaugen.

In the Gulf of Mexico, US producers started rebooting idle rigs following a five-day closure due to Hurricane Sally.